Elon Musk's Tesla (TSLA) has been on something of a roll lately.
Shares recently topped $1,000 again. That helped push the stock back into the exclusive club of companies with market capitalizations over $1 trillion. The company also just launched production at its Berlin Gigafactory replete with a brief dance routine from Musk.
But Real Money Columnist Jim Collins is concerned.
“Tesla finally achieved GAAP profitability and cash flow positivity by building a plant in Shanghai and running the hell out of it," Collins wrote recently on Real Money, adding that "about one-third of its output [is] exported to Europe.”
Collins drew a sharp contrast between London, where he was writing and China. He argues that concern over climate change in Europe puts it at a disadvantage.
The Chinese "clearly don't care about air pollution or climate change mythology,” Collins noted. "Just as major cities like Beijing and Shanghai are, according to my friends there, making it very difficult to get a license plate for anything but an EV, China is building the hell out of coal generation plants."
That makes China a winner in Collins' eyes. "I would go long China and short Europe," Collins wrote. "Elon, puzzlingly, is doing the exact opposite, with his German white elephant plant in Grunheide."
To follow up on Tesla's Shanghai success, "Elon has decided to open a factory that is quite far from European industrial infrastructure in what is, in my experience, the highest labor-cost country in the world," Collins wrote. "How was that a good idea?
Collins' answer: "It wasn't.”
But there's no reason not to take advantage of the situation. “If you want a pair’s trade, long China short Europe, short TSLA and go long on NIO (NIO),” Collins added.
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